Macmillan CEO: ‘We will be more than fine in the land of the giants’

Macmillan CEO John Sargent wrote a letter to authors, illustrators and agents working with the publisher, pledging not to settle the price fixing lawsuit with the Department of Justice (as Penguin did this week).

I do know that we are not in discussions, with anyone. This will leave us where we have always been, the smallest of the big publishers. It has never hurt us in the past, and I expect it will not hurt us in the future. Publishing trade books is, in the end, a human endeavor. The relationship between editor and author does not scale. Nor do the relationships between sales rep and bookseller or between publicist and producer. Certainly there are some advantages to being big, but the essence of the business is not a function of size. You need a certain level of capital and infrastructure, but that does not require being a behemoth. We will be more than fine in the land of the giants. I expect we will continue to grow and prosper.

He also explained why the company has not settled with the government.

There are two reasons we decided not to settle. First, it is hard to settle when you have done nothing wrong. Much as the lawyers explain to me that settling is completely standard business procedure, it still seems fundamentally flawed to me somehow. Call me old-fashioned. The second reason is the more important one. Since the very beginning, the government’s demands have never wavered in all our discussions. They still insist on the two year discounting regime that forms the heart of the agreement signed by the three settling publishers. It was our belief that Amazon would use that entire discount for the two years. That would mean that retailers who felt they needed to match prices with Amazon would have no revenue from e-books from five of the big publishers (and possibly the sixth) for two years. Not no profit, no revenue. For two years. We felt that few retailers could survive this or would choose to survive this. Simultaneous discounting across the major publishers (you could think of it as government-mandated collusive pricing) would lead to an unhealthy marketplace. As we heard of each successive publisher settling, the need to support retailers, both digital and bricks and mortar, became more important.